The morning London session’s forex calendar was a bit sparse, so market players apparently turned to risk sentiment for direction since battle lines were drawn between the safe-havens and the higher-yielding comdolls.
And since risk-taking prevailed, the safe-havens ended up getting stomped by the comdolls, with the Aussie ultimately emerging as the one currency to rule them all.
- German final Q2 GDP q/q: unchanged at 0.5% as expected
- U.K. gross mortgage approvals: 39.6K vs. 40.6K expected, 40.3K previous
Commodities are finishing the week on a strong after tumbling yesterday.
Commodities got pummeled yesterday partly because of the Greenback’s strength. And since the Greenback was broadly lower today, it’s likely safe to say that demand for commodities was spurred by the Greenback’s weakness.
After all, a weaker U.S. dollar means that globally traded commodities becoming relatively cheaper to buy, especially for market players who hold non-USD currencies.
And just for reference, the U.S. dollar index was down by 0.25% to 95.31 for the day by the end of the session. And as mentioned earlier, the Greenback extended its slide and was one of the major losers of the session.
Aside from Greenback strength, market analysts also say that oil prices were on the rise because of U.S. sanction on oil producer Iran.
Base metals were broadly in positive territory.
- Copper was up by 0.92% to $2.679 per pound
- Nickel was up by 1.02% to $13,375.00 per dry metric ton
Precious metals were raking in gains despite the risk-friendly vibes.
- Gold was up by 0.39% to $1,198.60 per troy ounce
- Silver was up by 0.47% to $14.610 per troy ounce
Oil benchmarks had an impressive run.
- U.S. WTI crude oil was up by 1.22% to $68.66 per barrel
- Brent crude oil was up by 1.32% to $75.72 per barrel
Some risk-taking ahead of Powell’s speech
Europe is ending the week on an upbeat note since the major European equity indices were broadly in the green during the morning London session and ahead of Fed Chair Powell’s speech.
Market analysts couldn’t pinpoint a reason for the risk-friendly ending in Europe, but they did point out that the energy sector was outperforming. The basic materials sector also had a good showing, thanks to strong demand for mining shares.
It’s therefore very likely that the risk-friendly vibes in Europe were due to rising commodity prices.
- The pan-European FTSEurofirst 300 was up 0.31% to 1,504.11
- Germany’s DAX was up by 0.25% to 12,396.01
- The blue-chip Euro Stoxx 50 was up by 0.41% to 3,433.55
U.S. equity futures were also in positive territory, hinting that the risk-friendly vibes may carry over into the upcoming U.S. session. Fed Chair Powell would be speaking later, though, so risk sentiment could still flip back to risk-off.
- S&P 500 futures were down by 0.22% to 2,864.25
- Nasdaq futures were down by 0.30% to 7,446.50
Global bond yields rise
Another sign that risk-taking was the name of the game was the broad-based rise in global bond yields.
- German 10-year bond yield up by 0.87% to 0.345%
- French 10-year bond yield up by 0.06% to 0.684%
- U.K. 10-year bond yield up by 0.55% to 1.279%
- U.S. 10-year bond yield up by 0.50% to 2.835%
- Canadian 10-year bond yield up by 0.35% to 2.268%
Major Market Mover(s):
USD & JPY
The Greenback and the yen have been showing weakness since the earlier Asian session and they continued to do so during the morning London session, with the Greenback being the weaker of the two. However, the yen is still the biggest loser of the day (and of the week for that matter).
The yen likely got a double whammy from the risk-on vibes and the rising bond yields.
As for the Greenback, it was likely under pressure because of unwinding of safe-haven bets, but market analysts also suggest profit-taking ahead of Fed Chair Powell’s speech later.
EUR/JPY was up by 20 pips (+0.16%) to 129.04, GBP/JPY was up by 16 pips (+0.11%) to 143.00, CHF/JPY was up by 15 pips (+0.13%) to 113.17
USD/JPY was down by 3 pips (-0.04%) to 111.30, USD/CHF was down by 15 pips (-0.15%) to 0.9835, USD/CAD was down by 18 pips (-0.14%) to 1.3067
AUD & NZD
The higher-yielding Aussie and Kiwi were both in demand, likely because of the risk-friendly vibes and rising commodity prices. And in the Aussie’s case, we can also probably add relief buying after Australia got a new PM.
AUD/USD was up by 23 pips (+0.32%) to 0.7302, AUD/JPY was up by 22 pips (+0.27%) to 81.29, AUD/CHF was up by 11 pips (+0.16%) to 0.7183
NZD/USD was up by 17 pips (+0.26%) to 0.6666, NZD/JPY was up by 16 pips (+0.21%) to 74.20, NZD/CHF was up by 8 pips (+0.12%) to 0.6557
Watch Out For:
- 12:30 pm GMT: Headline (-1.0% expected vs. 0.8% previous) and core (0.5% expected vs. 0.2% previous) readings for U.S. durable goods orders
- 12:55 pm GMT: BOE Chief Economist Andy Haldane is expected to speak in a panel discussion
- 2:00 pm GMT: Fed Chair Jerome Powell will give a speech at Jackson Hole